Megaupload Data Subject to Deletion by Hosting Providers Feb. 2

With Megaupload's financial assets frozen and unable to pay its bills, the hosting companies storing the data may begin deleting the data Feb. 2.

All the photos, video and files stored on file-sharing site Megaupload could be permanently deleted from its servers sometime this week, according to federal prosecutors.

Megaupload contracted with third-party hosting companies to store the actual files that users uploaded to the server. However, those providers have not been paid since the Federal Bureau of Investigation blocked access to Megaupload and executed search warrants to shut down the service on Jan. 19. Megaupload's bank accounts have been frozen by federal authorities, preventing the company from paying its hosting bills, Megaupload attorney Ira Rothken told the Associated Press.

While Megaupload was shut down for its role in facilitating online piracy that the film and music industry claims cost them as much as $500 million in revenue, many users complained about losing access to personal data such as family photos and documents.

The data still exists on the servers, but providers Carpathia Hosting and Cogent Communications may begin deleting the information as early as Feb. 2, according to a letter filed by the U.S. Attorney's Office to the U.S. District Court of Eastern Virginia.

"Now that the United States has completed execution of its search warrants, the United States has no continuing right to access the Mega Servers," U.S. Attorney Neil H. MacBride wrote in the letter.

Authorities have copied some, not all, of the data on Megaupload servers, according to the letter. Contrary to previous reports, it appears the government did not seize the physical servers. Now that the search warrants had been executed, federal authorities don't have legal right to look at the remainder of the data.

Megaupload is working with the prosecutors to try to keep the data from being erased, especially since the company needs the data to defend itself in the legal case, according to Rothken.

However, Carpathia Hosting issued a statement claiming that it "does not have, and has never had, access to the content on MegaUpload servers." Furthermore, the company "has no mechanism for returning any content residing on such servers to MegaUpload's customers," and users should not contact Carpathia about reclaiming their data, according to the statement. The claim that the companies would delete the content was not based on any information provided by Carpathia to the federal government, the company said.

Users complaining about losing their data should have kept backups, as Megaupload "expressly informed" users through the Frequently Asked Questions and Terms of Service that there was some risk to losing their data, the Department of Justice said in a statement shortly after the shutdown.

"It is important to note that Mega clearly warned users to keep copies of any files they uploaded," the DOJ said.

Several companies have recently changed their policies in an attempt to avoid Megaupload's fate. Dutch-company FileSonic disabled all file-sharing functionality on its site. "Our service can only be used to upload and retrieve files that you have uploaded personally," the company said Jan. 24. UploadBox also shut down file-hosting services and is expected to delete all its files on Jan. 30.

Hong-Kong based has turned off its service to users in the United States. "Our service is currently unavailable in your country. Sorry about that," according to the message displayed on the site for U.S. visitors.

While Megaupload's shutdown was "unfortunate" for those users who used the service for legitimate purposes, "Our stance is that the company that you store your data with matters," Jesse Lipson, vice president and general manager of data sharing at ShareFile, which was recently acquired by Citrix Systems. "There are trustworthy third-party solutions, that when used in well-structured and transparent business environments, provide reliable data storage and data sharing," Lipson said.

The shutdown reflects the "increasing crackdown" on intellectual property violations online and it won't be a "big surprise" if similar sites are affected, Lipson said.